EconPapers    
Economics at your fingertips  
 

Foreclosure discounts for German housing markets

Tobias Just (), Michael Heinrich, Mark Andreas Maurin and Thomas Schreck

International Journal of Housing Markets and Analysis, 2019, vol. 13, issue 2, 143-163

Abstract: Purpose - This paper aims to investigate the foreclosure discount for the German residential market in the years from 2008 to 2011. Design/methodology/approach - The determinants of the foreclosure discount are estimated in a hedonic price model. The analysis is based on a unique data set compiled from three different data sources with 135,000 foreclosed properties. Findings - The findings reveal that residential units in foreclosures are sold at a discount of 19 per cent compared to residential units with similar characteristics that are not in foreclosure. Second, a regional pattern can be observed, with discounts being negatively correlated to unemployment risk and liquidity. Third, the model with interaction terms shows that foreclosure discounts are linked to specific property characteristics. Fourth, these object-related risks are typically smaller than regional risks or locational risks. Research limitations/implications - Given the highly fragmented system of Gutachterausschüsse in Germany, who are responsible for collecting transaction data, we were not able to directly analyze transaction data, but only a proxy for this price information. Practical implications - The results can be important for financial institutions that are trying to assess the risk of lending for a specific object in a specific location. So far, banks primarily try to assess the default risk of private lenders by analyzing the debtor’s financial position and the quality of the property. The analysis provides insights into which characteristics of a property might imply additional risk, and in which region these risks are biggest. Originality/value - To the best of the authors’ knowledge, this is the first attempt to analyze the foreclosure discount for the German housing market.

Keywords: Liquidity; Characteristics of a property; Distressed assets; Foreclosure discount; German regions; Hedonic house price model; G12; G21; R31; R32 (search for similar items in EconPapers)
Date: 2019
References: Add references at CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
http://www.emeraldinsight.com/10.1108/IJHMA-12-201 ... RePEc&WT.mc_id=RePEc (text/html)
Access to full text is restricted to subscribers

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eme:ijhmap:ijhma-12-2018-0106

Ordering information: This journal article can be ordered from
Emerald Group Publishing, Howard House, Wagon Lane, Bingley, BD16 1WA, UK
http://www.emeraldgrouppublishing.com/JPIF.htm

Access Statistics for this article

International Journal of Housing Markets and Analysis is currently edited by Professor Richard Reed

More articles in International Journal of Housing Markets and Analysis from Emerald Group Publishing
Bibliographic data for series maintained by Jade Turvey ().

 
Page updated 2021-08-03
Handle: RePEc:eme:ijhmap:ijhma-12-2018-0106